How to Change a Local Sponsor in Dubai?

by Zaara 22, Jan 2021

How to Change a Local Sponsor in Dubai?

If you are starting a business in Dubai, UAE, you are already aware that a foreign investor needs to find a local sponsor. A local sponsor will own the maximum, i.e., 51% of shares in the business, while the foreign investor will own the remaining 49%.

However, the sponsor’s involvement in running the business is minimal. For an annual fee, most sponsors sign away their power of attorney to the foreign investor.

Still, situations can arise that warrant a change in local sponsors for a company.

But first, let us understand the responsibilities of a local sponsor for your business in Dubai.

  • Cancellation of employee work visa
  • Cancellation of the labor status for employees
  • Closing the bank accounts
  • To resolve any outstanding debt if there is any
  • Deal with the government officials and Ministries on behalf of the businesses and also facilitate the renewal procedure
  • Translating the business contracts for company registration that are in Arabic

Coming back to the procedure of changing your local sponsor, we have listed down a few things you can do to change your local sponsor in Dubai.

Speak with your Current Local Sponsor

If there is a conflict between you and your current local sponsor, the first thing to do is resolve the matter first. But if it still doesnt work, you can change the sponsor, hopefully with the cooperation from the current sponsor. Mediation, and even informal discussions, can help all the parties work through their matters and reach an agreement. If your current sponsor refuses to agree to a change in sponsorship, you may need legal assistance to pursue the matter.

Gather Important Documents

For a smooth change of local sponsor, foreign investors must present certain documents to the court. These documents include but are not limited to a Memorandum of Association (MOA) between the foreign investor and local sponsor, a power of attorney, and receipts of annual sponsorship payments.

Submit the Documents at the Court with your Current Sponsor

Once you have your documents and your current sponsor agrees to the change, you will meet at the court where an official will review your documents and confirm your current sponsor’s approval. Then, new documents, including a revised MOA and trade license, will be issued for your company to show your new sponsor.

How can Commitbiz help you?

We, at Commitbiz, handle all your local sponsor related requirements completely so that you can concentrate on your business growth! Contact us today for our services in the UAE.

Our consultants can also help with business incorporation, office space IP, pro services, accounting, and bookkeeping, and corporate secretarial services in the UAE.

FAQs

Why do Businesses change their Local Sponsors?

  • The local sponsor is busy or unavailable

  • Sponsors are difficult to contact (this happens when the companies are in contact with the sponsor through a 3rd party)

  • Appointing the sponsor is costly

  • Lack of clarity in the processes

How can companies move from 49% to 100% foreign ownership in Dubai?

By changing their present Memorandum Of Association as it registered with the Economic Department for updating the changes. 

For that to happen companies have to -

  • Seek approval (initial) from the economic department

  • Register the changed MOA 

  • Pay the requisite fee

  • Changing the trade license for the company for those changes to start reflecting

How to change my LLC company to a Sole Proprietorship in Dubai?

 

You cannot convert an LLC company with more than 1 shareholder to a Sole Proprietorship.

What you can do is transfer the LLC company license to a solely owned LLC.

What things should be kept in mind before selecting a Local Sponsor?

  • You should do a thorough background check of that sponsorer

  • Compensation should be approved by both the parties

  • Try to get sponsors working in the government departments, because seeking connections after that is tough.

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